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Thursday / 13 February 2025
HomeFeaturesHow much more you pay for a R250,000 car at the highest interest rate since 2009

How much more you pay for a R250,000 car at the highest interest rate since 2009

Following the latest interest rate hike from 11.25% to 11.75%, the average consumer is paying R4,947.56 per month for a R250,000 car on a finance plan, R64.83 more than the month before.

On 25 May, the South African Reserve Bank (SARB) Monetary Policy Committee announced a 50 basis points (bp) increase to the country’s repo rate, taking it from 7.75% to 8.25%, in turn making the prime lending rate the highest it has been since 2009.

“While the latest interest rate hike is not a surprise, given the current economic headwinds, its implications will not be welcomed by consumers,” said Lebogang Gaoaketse, WesBank’s head of marketing and communication.

“Household budgets remain under tremendous pressure and those who have had car and home loans since the start of the rate hiking cycle, post Covid-19, will now really start feeling the effects.”

Financing a R250,000 car at 11.75%

An entry-level vehicle with a value of R250,000 that is financed over 72 months at the previous interest rate of 11.25% would have resulted in a monthly payment of R4,882.73 before the latest rate hike.

Now, the same car results in a monthly settlement of R4,947.56, according to WesBank, equating to a difference of R64.83.

For a better picture of what is available in this price bracket, the following cars can all be had for R250,000 or slightly under:

“While these incremental increases to the installment seem small, their compounding effects add up over the lifetime of the finance agreement,” says Gaoaketse.

“The customer will now be spending an amount of R4,667.76 over the 72-month term due to the move in the interest rate, bringing the interest amount of that vehicle to R100,000.”

This is why it’s important to consider the full cost of ownership throughout the lifetime of the vehicle and not just the starting price before making a financially-binding decision.

According to Gaoaketse, affordability will be a key consideration in consumer purchasing decisions going forward as customers are actively seeking alternatives to alleviate financial pressures in the current economic climate.

“The impact of the interest rate hikes since the relief experienced by consumers during Covid-19 has a greater effect and it is these increases that really begin to impact consumer debt in the longer term,” he said.

“The compounding effects of interest rate increases on car, home, credit card, and other debt repayments, are beginning to weigh heavily on consumers. Household debt levels in South Africa remain at high levels – with more than 62% of disposable income servicing debt.”

The rising interest rates and inflation, coupled with a deteriorating Rand hampered by the power crisis and geopolitical concerns, will see buyers either postpone vehicle purchases, buy down, or exit the new market altogether in order to find better value in the used market, said Gaoaketse.

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